UPDATE (2/4/13): We have updated the summary of the opinion after a closer, more in-depth review. The updated summary is below.
Following is a brief summary of an Opinion issued by the Louisiana Supreme Court yesterday regarding remediation standards of the surface in a mineral lease. We are very concerned about the implications and will take every necessary step to protect the industry. If you have any questions, please do not hesitate to contact the LOGA office.
On January 30, 2012, the Louisiana Supreme Court issued what seems to be the most far-reaching opinion yet for legacy environmental cases subject to Act 312 of 2006. The court declined to hold that a remediation sufficient to meet regulatory standards is sufficient as a matter of law to likewise satisfy contractual obligations under a lease. This will allow surface owners to claim damages in excess of the cost of the remediation performed under Act 312, as amended. The opinion continues to allow “reasonable wear and tear” when there is no “unreasonable or excessive use” of leased premises, but the practical significance of these legal standards may be limited by the potential for varying results by judges and juries. In addition, where there is “unreasonable and excessive use” potentially the cleanup obligation could be viewed as an obligation to restore the surface to its prelease conditions.
This opinion will allow plaintiffs to recover the excess damages from a regulatory cleanup to pre-lease conditions where there is no express contractual provisions imposing such a restoration obligation. In Vermillion v. LL&E issued January 30, 2013, the Supreme Court creates substantive rights that never existed pursuant to law or contract by incorporating and substantially expanding implied obligations created by law into existing mineral leases that impose standards to restore property to pre-lease conditions in the absence of any express provision to do so even where doing so may be impossible or technically or economically infeasible and that go beyond recognized standards promulgated in accordance with law to ensure safety of human health and the environment.
In doing so, the State Supreme Court undermines both the United States Constitution and State Constitution by writing into established contracts, existing mineral leases, an obligation to restore a property to pre-lease conditions, even where this obligation is far beyond what is needed to protect human health and the environment and where the parties never negotiated or had any expectation of any such an obligation.
The opinion of the Supreme Court further completely ignores the mandates of the Louisiana Constitution set forth in the Public Trust Doctrine and does not even bother to discuss the balancing required by that constitutional provision or the Supreme Court cases interpreting that provision (Saveourselves and its progeny).
Further this opinion completely contradicts and is inconsistent with La. R.S. 30:29 and other Supreme Court cases, such as Castex and Marin. And oddly enough, this opinion is even inconsistent with the rationale set forth in the Corbello case which initiated this onslaught of litigation, which is entirely unique to Louisiana.
We will be continually studying and assessing the impacts of this Supreme Court Opinion and will provide you with a more comprehensive assessment with recommended courses of actions to respond in the upcoming days and weeks.
If you have any questions at all, please call Gifford Briggs at the LOGA office (800) 443-1433 or by email – firstname.lastname@example.org
Thanks to Lou Buatt, attorney with Jones Walker for helping LOGA pull this review together.